Archive for October, 2016

On 11 October 2016 Hon Michael Woodhouse, Minister for immigration confirmed changes to New Zealand’s residence programme which would take immediate effect to reduce levels of permanent immigration.

Immigration Minister Michael Woodhouse today announced that fewer residence approvals would be planned for the next two years, with levels down to 85,000-95,000 from 90,000-100,000.

While presented as a minor reduction to improve the benefit provided by immigration it is important to assess the actual likely effect of these changes. Very clearly:

This is not a minor change at all;

It will have a significant effect on reducing skilled migration to New Zealand.

The changes made are interesting and so are the reasons being provided for these changes.

For example, current quotas of between 45,000 and 50,000 residence visas being granted per year have been unchanged since 2001. Previously the immigration department (INZ) has simply managed numbers by simply selecting less applications.

This has proved so effective that 2016/17 is the first year since 2008/09 where the number of visas granted has met or exceeded the minimum quota of 45,000 per year. During that time the quota allowed for grant of at between 17,761 and 42,761 more visas than were actually allowed.

Clearly these changes are not being made to effect a small reduction in the quota, that would be redundant and unnecessary.

Residence Programme
The Residence Programme includes all residence visas granted including partners and dependent children of New Zealand citizens, investors and entrepreneurs as well as skilled workers and their families. Last year the following visas were granted:

25,756 (49.5%) – skilled professionals (SMC);

3,963 (7.6%) – other workers, investors and entrepreneurs;

4,138 (8%) – humanitarian;

5,739 (11%) – parents and siblings of workers;

12,456 (24%) – partners/dependent children of citizens/residents.

Most of these groups are tricky to reduce and for this reason Mr Woodhouse’s announced changes affect the SMC and Parent Category as areas of easy change.

“Increasing the points required to gain residence from 140 to 160 will moderate the growth in applications in the Skilled Migrant Category and enable us to lower the overall number of migrants gaining residence,” Woodhouse said.”

Skilled Migrant Category (SMC)
The most significant change announced was to the SMC, a residence stream making up approximately half of the Residence Programme.

SMC is accessed on an invitation-only basis by qualified professionals in specifically selected occupations. Typically they are already living (*76%) and working in New Zealand in skilled occupations (*64%).

By its nature INZ has complete control over who is invited into the SMC and uses a points system to identify who is the most ‘attractive’ as a candidate. Candidates are generally in roles which are likely to create jobs and opportunity for New Zealand businesses – for example the rebuild of Christchurch, I.T. and creative businesses, accountancy and engineering.

The change presented by Mr Woodhouse is that the selection point of 140 is simply being raised to 160 to reduce immigration numbers slightly.

To present this as such a simple change is not accurate however as roughly 18% of candidates selected to access SMC so far this year had less than 140 points but were allowed to enter the system as they already had a skilled job in New Zealand – roughly 90% of those were already living and working in NZ.

The first selection made after this change was implemented (made on 12 October 2016) shows a drop in numbers of over 50%. I know it is very early days yet, but over a year this would be projected to 24,800 people!

This is not a minor change with potentially 24,800 less people paying taxes, training NZ workers, creating jobs and business opportunities. Government figures indicate this would be a loss (net of costs) to New Zealand each year of $1 billion or more and also represents a $35 million drop in revenue for the immigration department.

Raising quality
Raising the points bar is not a way to raise the ‘quality’ of candidates.

The current system is invitation only with qualified workers in specific occupations being selected. Where amending the list of occupations allowed through, selecting specific skills or identifying skill gaps more carefully would have had a useful effect in increasing ‘quality’ simply raising the bar will not.

For example I am currently assisting a Construction Project Manager with over 20 years’ experience who is employed helping to rebuild Christchurch. Construction Project Manager is an occupation identified as being in serious shortage but despite his skills, experience and a job in Christchurch my client can only attract 125 points. Before the announced changes this would have been enough to apply for residence but now he is blocked from gaining residence and will have to leave New Zealand in time.

Simply raising the points barrier to a higher level will not favour those with higher skills and experience we need, it will not identify those with skills in shortage. Instead it is likely to favour those with higher qualifications making this a big step backwards – the immigration system in place before 2001 favoured qualifications and was a failure.

Working Holiday Visas
A point raised by journalists more aware of how New Zealand’s immigration system works is the issue of Working Holiday Visas (WHV). WHH is a temporary visa lasting from 12 to 23 months which allows a young person (under 30 or 35 depending on their ethnicity) to come to live and work in New Zealand.

Mr Woodhouse said the issue of temporary visas was separate to that of visas that led to residency.

Temporary visas were not putting pressure on cities like Auckland, but were filling job shortages in the regions, he said.

“Those strongly growing areas – [visitors] like working holiday-makers aren’t staying in Auckland. They are going out into the regions, where there are high levels of demand for labour.”

While SMC numbers have been reduced (on average 3,500 lower than expected per year over the past 5) the number of Working Holiday Visas (WHV) being granted has been increasing.

Numbers of visas granted have more than doubled since 2006/07, rising from 33,051 in 2006/07 to 69,051 last year. This is clearly a favoured category: Mr Woodhouse signed the most recent agreement allowing more as recently as 26 September 2016.

That increase of tens of thousands of people each year appears to have been noticed by mainstream New Zealand as migrants with WHVs can work in jobs that require no training or experience – such as the local supermarket or fast-food outlet – placing them in direct competition with NZ workers, something which is not permitted with skilled workers.

Another difference between holders of WHVs and skilled workers holding other work visas is that while skilled workers must by law be paid a market rate salary there is no check on what is paid to people on a WHV. Increasing the number of these visas has the effect of strengthening a low-wage economy and making it harder for New Zealanders, especially school-leavers to find work.

Summary
The changes implemented by Mr Woodhouse appear to have nothing to do with reducing a quota which has been managed very well within the new tolerances for many years. Instead they are likely to have the effect of cutting skilled migration in favour of a much larger increase in unskilled temporary labour working for less and competing directly with New Zealanders for jobs – the antithesis of the stated intention of the immigration system.

That might increase corporate profits but will also cause a drop in tax being paid and will certainly not help New Zealand workers looking for entry-level jobs. I am not sure I agree with BusinessNZ chief executive Kirk Hope:

“Today’s announcement is an encouraging sign of progress towards a migration system that benefits the workforce and New Zealand generally.”